Chairman's and CEO's Statement

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Extracted from Annual Report 2017

Dear Shareholders,
On behalf of the Board of Directors, we are pleased to present to you the Annual Report for BSL Corporation Berhad ("BSL") for the financial year ended 31 August 2017.


During the financial year ended 31 August 2017 ("FY2017"), the Group continues its objective to grow on the existing business as well as diversify into new segments to have a stronger income stream. The strategy to grow the core business of stamping and PCB assembly is via the indepth focus on EMS sector and we have secured new opportunities which are explained further at the Current Year Outlook segment below. FY2017 was also a proud year where the renewable energy sector of the Group has gained further traction through the completion of key projects as described in the Operational Review segment below.

Financial Review

For the financial year under review, the Group's turnover from continuing operations increased by RM38.0 million or 35.1% to RM146.3 million as compared to RM108.3 million recorded in the previous year.

The growth in turnover was contributed by the increase in orders for TV back chassis as well as agricultural components. In addition, the completed solar energy engineering, procurement, construction and commissioning ("EPCC") projects by the renewable energy division also contributed positively towards the growth in turnover.

The Group reported a profit after tax for the FY2017 of RM3.67 million compared to RM4.60 million the previous year which is a slight decline of RM0.93 million.

The higher profit after tax in previous year was due to the non-operation income from the conversion of provision of doubtful debts and the gain on disposal of our former PCBA factory located in Meru, Klang.

Despite the decline in profit after tax, the Group has posted better operational results. Besides improvements in turnover, sustained efforts in various continual improvements especially in efficiency has helped increase operational profit.

Profit per share for the continuing operations of the Group is 3.31 sen.

Capital Structure And Capital Expenditures

The Group continues to strengthen its balance sheet as evidenced by the improved equity attributable to the owners of the Company of RM77.1 million where it has increased by 3.7% from prior year.

During the financial year under review, the Group incurred capital expenditures amounting to RM8.7 million. Significant portion of this expenditure relates to the solar farm we constructed and own at Universiti Teknologi Malaysia. The capital expenditure of the Group is mainly funded by the internally generated funds and external borrowings.

Our total borrowings currently stands at RM17.38 million as compared to RM15.50 million in the prior year which translates to a debt to equity ratio of 22%. Complementing this healthy debt to equity ratio is a strong balance sheet with a net assets attributable to owners of the Company of RM77.1 miilion and overall cash holdings of RM13.9 million. The Group also reported a net cash generated from operating activities of RM5.85 million during the year.

Operational Review

Despite a challenging environment, the stamping division continued to show improvement in both turnover and profitability. For 4 years in a row, we have improved our turnover from RM69.0 million (FY2014) to RM121.2 million (FY2017). This latest result means that we are almost back to our peak turnover of RM131.0 million achieved in FY2011. Turnover improved by RM24.3 million or 25.1% compared to previous year's turnover of RM96.9 million. Profit before tax improved from RM0.18 million to RM5.6 million. We enjoyed improved sales from many key clients, with clients from television, agriculture, ventilation fans and air-conditional industries leading the way. Our production of back chassis for LCD TV commenced smoothly with sizeable contribution to both sales and profit. In view of increasing cost of manufacturing, this division is continuing effort in automation. Among completed projects were automation for multi-tapping, spot welding and wire bending. We will intensify automation effort if further increase in minimum wages or foreign workers levy cost materialize as expected in 2018.

Our PCB Assembly division registered RM13.9 million in sales compared to RM11.6 million, an improvement of RM2.3 million or 19.8%. However, this division suffered a loss of RM0.5 million as compared to a profit of RM2.2 million a year earlier. Last year's profit was boosted by special gain from conversion of doubtful debt into securities and gain from disposal of vacant factory. Operationally, we have managed to reduce the losses. Several clients increased their order quantities due to favourable market condition and increased confidence in this division. These include clients in audio and home appliances. This division also managed to rope in new clients with various end products such as automotive USB, infant ICU monitoring system and electrical surge protector. We concentrated on effort to stabilize the operation after much changes to drive improvement was implemented the previous year. In coming months, we hope to implement new software to improve planning, delivery and inventory control.

We are proud to announce that the stamping division has successfully upgraded their ISO 9001 (Quality Management System) and ISO 14001 (Environmental Management System) to the latest 2015 version by their respective certification bodies while the PCB Assembly division is in progress towards achieving the same feat.

Our renewable energy division registered a turnover of RM20.4 million and profit of RM2.2 million.

During the year, we had completed 2 EPCC projects for Solar Energy project of which one of the project is owned by BSL at Universiti Teknologi Malaysia in Kuala Lumpur. The connection to Grid was completed in January 2017.

Malaysia has set a target in its 11th Malaysia Plan to boost the country's electricity generation capacity through renewable sources.

The development of LSS program by Suruhanjaya Tenaga and the commencement of Net Energy Metering program by SEDA are fostering the development of Solar Energy as one of the main contributor towards country's vision in developing Renewable Energy.

Besides Malaysia, our team is also seeking opportunities in several neighboring countries in particular, Vietnam for the Solar Energy related businesses.

Another key milestone for our renewable energy sector was the signing of 2 Memorandum of Understanding ("MOU") during the year with Seraphim, who is a first tier solar panel producer in the world, and with TBEA, who is a supplier of transformer and inverters in China. The signing of these MOU enables BSL Eco Energy to be the distributor of Seraphim's solar panels in Malaysia and TBEA’s transformers and inverters in Vietnam.

Anticipated Or Known Risks

Any changes in the country's regulations and policies may have an impact on the Group's operations. Being a manufacturing based Group, changes to the labor law may have an impact on the earnings of the Group for the stamping segment. To mitigate this, we are always looking at automating our processes to reduce manual work and improve efficiency as well as output.

As for the renewable energy segment, equipment prices fluctuations is a risk to our business. As we seek to competitively price our products, increase in equipment prices can erode our margins. The Group has taken steps to mitigate this risk by having Memorandum of Understanding with key equipment suppliers in the renewable energy sector as described above.

Current Year Outlook

Our Group's intention to reshape our traditional manufacturing business from component maker to an EMS provider is gaining traction. We managed to secure a LED lighting job from a UK company. An existing client also awarded us the fabrication, procurement and complete assembly of an automatic egg elevator. Both jobs are expected to start in early 2018. We have invested in a fiber laser cutting machine and CNC press brake machine to facilitate the EMS business model. Both machines, which are financed through hire purchase arrangement, are expected to be installed and fully operational by January 2018.

In November 2017, we entered into a joint venture agreement to set up BSL Development Sdn. Bhd. ("BSLD") with the intention to develop properties. BSLD intends to target small scale and competitively priced development of shop lots, landed houses or apartments. Our longer term goal is to be a developer of affordable housing in Malaysia. We hope to synergize the housing development with our renewal energy segment. In 2016, we have signed a MOU with our development partner to install the solar energy system into one of their upcoming project.


The Board does not recommend any dividend payment in respect of the FY2017. We decided to be financially conservative in view of possible cash requirement to expand our renewable energy and EMS businesses.

Corporate Governance

The Board appointed an independent service provider to carry out quarterly internal audit review on the Group's major operations and internal procedures. Thus far, 4 internal audit reports have been issued and the Group is following up closely on implementation action plans to address any matters arising from these internal audit reports.

The Board remains resolute that the Group will continue to improve on the Group's best practices and adhere to the recommendations of the relevant standards in Corporate Governance.

A more detailed approach in the Group's practices on corporate governance is set out in our Corporate Governance Statement in page 17 to 26.


On behalf of the Board, we would like to acknowledge and recognize the contribution by all the Directors, management team and employees of the Group for their continuous support and commitment towards elevating the Group to a higher level. We also would like to thank our shareholders, clients, business associates, partners and the relevant government authorities for their continuing support and confidence to the Group.

Thank you.

Ngiam Tee Wee
Chief Executive Officer

28 December 2017

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